 The Paoli Group Website | The Paoli Group Blog | Members WHEN DOES PRICING HAVE MEANING?? The quick answer is pricing always means something. It is where a buyer and seller meet, therefore establishing a current market value. Unfortunately, taken over longer periods of time, most transactions are meaningless and provide no real value for the analysis being done by a buyer. True, as long as the greater fool theory exists, there is always the possibility that someone will be willing to pay more in the future. However, when does a transaction provide a buyer with real conviction about the future pricing for a property? In my opinion, this occurs only at downside extremes. What constitutes an extreme? THE LAST TWO YEARS IN THE HOUSING MARKET, plus: • Unmotivated buyers • Lack of available credit • Forced liquidation of properties due to foreclosure and bankruptcy • General pessimism throughout a market Wow, that sounds a lot like Steamboat 2009. If we can make the assumption that Steamboat's overall big picture has been as miserable as possible for a seller of real estate, were there any transactions which provide us with useful information? My answer is yes, and below are a few transactions I feel are worth highlighting: Lot 82 in the Sanctuary: Click Here to View Listings This lot is located on the very coveted Aspenwood lane. The buyer was a very opportunistic buyer with no urgency and cash. This sale is a good indication of where an educated, unmotivated, investor views the value for a good building lot in the Sanctuary Subdivision. Neighborhood is important, since the sanctuary is the most established high end neighborhood within the city limits. Highmark auction and sale of Penthouse plus additional units: why is this more valuable than the closings at Edgemont and One Steamboat Place? In my opinion, the Highmark is a great indication of where the floor is for slopeside (or across the street from slope side) condos in a nice project. The Highmark was unsupported by the local development community, had an un-trusted developer, is not an easy product to finance and the auction went terrible. With all of the above negative issues surrounding the property, buyers stepped up after the auction to purchase units at prices ranging between $400 and $450/sqft. It is our opinion that these transactions represent a floor for the Steamboat Springs Base area projects. A side note about valuations to consider is the significant premium the Bear Lodge sells at relative to the Highmark. Click Here to View Listings. Obviously the Bear lodge is a great project, done by a great developer, but why does a significantly inferior location, with a similar quality product receive such a large premium in the market? We think this is a mistake, to be adjusted over time. As for the closings at Edgemont and One Steamboat Place, (click here to view spreadsheet) we feel these sales show a willingness by buyers to pay high prices per square foot at the base area. Our concern is the remaining supply to be absorbed. These prices could remain stagnant for many years to come. Of the projects, we feel Edgemont represents the safest position for our clients due to the developer's lack of debt. Even though there are 25 units remaining to be sold, the developer has substantial equity and low debt, which should allow them to ride out slow future sales. Victoria closing downtown: Click Here to View Listings Here is a developer with an obvious sense of urgency. This transaction is for the best unit in the project at rock bottom prices. Again, the buyer of this unit had no urgency and cash. We feel the $400/sqft number for new downtown condos is a good floor to work from. Clearly there is still a lot of supply. There is a possibility that there are more distressed sales at lower valuations than this sale, but on average we would bet that a quality unit in downtown will not trade much below $400/sqft. From conversations with the developers, the demand appears to be high and a small adjustment in pricing could result in a number of transactions. This month's newsletter takes the opposite approach of last months. Here we felt the need to be a bit wordy. Last month we sent lots of year end data for data junkies to enjoy. As the Ski season and first selling season of 2010 comes to a close, we feel there is important information to be gathered from the transactions that have occurred. Our goal is to provide an insight into the Steamboat market that is only gathered through years of watching. The biggest concern in today's real estate buyer is, "Am I Early?". For all of last year, we answered this question with a big YES. Now, as we take the turn into the second quarter of 2010 this is changing. We are seeing signs that some markets are finding bottom with real, qualified, intelligent buyers. The three transactions mentioned above are good benchmarks by which to judge future pricing. One property type not identified above is Single Family Homes. The reason is the wide diversity among finishes, architecture, location, lot type, etc. With so many variables, it is hard to identify what constitutes a great deal. There is no pricing metric which can be used across the board, such as price per square foot. This number gives relatively little value across properties. For example, we recently had a closing for $485/sqft on a single family residence, which represented a good value and at the same time, there are similar quality homes on the market for $315/sqft that do not represent a good value. In almost all types of properties, we are seeing extreme situations, which we believe represent safe, unique buying opportunities. If there is a type of property that you have interest in, contact us and we can walk you through where the opportunities are. Best Regards, Chris Paoli and Amy Brown If you have any questions or wish to discuss any of the items mentioned above, email or call 970.819.1432 Summary for the month for February: • Total Sales Volume for the month of February 2010 is 267% over the volume from February 2009. • Units Sold are up 165% from February 2010 compared to February 2009. • YTD Volume is up 228% compared to the same period in 2009. • Fractional/Interval Sales for the month of February 2010 consisted of 55% of the transactions. • YTD Fractional/Interval Sales consisted of 59.89% of the products sold. • The Mountain Area produced 52% of all the Volume sold since the beginning of the year 2010. • While Volume and Units are up over last year, the number of loans recorded is down. • YTD in 2010 their have been 283 loans compared to 487 through the same period in 2009. Notable sales for the month of February 2010:
Notables over 2.5 Million • 2/25/2010 $4,750,000 M&B: Sec 6&7-8-84, Sec 3&30-7-84 & Sec 12-8-85 which is a Vacant Ranch Parcel consisting of 415 AC. It is shown as a sale in the Elk River Area. PPAC = $11,445.78. • 2/12/2010 $3,700,000 OSP at Apres Ski Way Condo Fee Simple Unit 615 – YOC 2009 – Street Address: 2250 Apres Ski Way. Of Note: • There is a Trade out in the South Routt Area, where there are two sales for $20,000 each between the same parties. In the Transaction numbers, these two sales throw off the numbers. For the real number, see the Residential section…which does not include these transfers as they are not statistically vali. February 2009 Market Analysis for Routt County Chris Paoli Amy Brown
Broker Associate/Broker Assistant to Chris Paoli Colorado Group Realty, LLC Cell 970.846.2114 Fax 970.870.2803 amybrown@mybrokers.com
The Paoli Group Blog: www.steamboatcoloradorealestate.blogspot.com
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